Global Courant 2023-05-26 05:40:57
Investors piling into stocks with artificial intelligence exposure can pay a high price.
Economist David Rosenberg, a bear known for his contrarian views, believes enthusiasm around AI has become a major distraction from recession risks.
“There’s no question that we have a price bubble,” Rosenberg Research’s president told CNBC’s “Fast Money” on Thursday.
According to Rosenberg, the AI wave has striking similarities to the dot-com boom of the late 1990s, especially when it comes to the NASDAQ 100 breakthrough in the past six months.
“(This) looks really weird,” said Rosenberg, who served as Merrill Lynch’s chief North American economist from 2002 to 2009. “It’s way too extensive.”
This week, Nvidia’s blowout quarter helped take AI enthusiasm to a new level. The chipmaker raised its full-year forecast after a strong quarterly profit following Wednesday’s market close. Jensen Huang, CEO of Nvidia, mentioned the growing demand for its AI chips.
Nvidia stock gained more than 24% after the report and is now up 133% in the past six months. AI competitors Alphabet, Microsoft And Palantir also see an increase in stock.
In a recent message to clients, Rosenberg warned that the rally is on borrowed time.
“There are width measures for the S&P 500 those are the worst since 1999. Just seven mega-caps accounted for 90% of this year’s price movement,” Rosenberg wrote. in 2000 when the dotcom bubble was peaking and soon to collapse in spectacular fashion.”
As megacap technology outperforms, Rosenberg sees ominous trading activity banksCour consumer discretion stocks and transports.
“They have the highest torque relative to GDP. They are more than 30% lower than cycle highs,” Rosenberg said. “They’re actually behaving in exactly the same pattern as in the past four recessions.”
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